In the fast developing knowledge economy age, the internal resources of an enterprise are usually not enough for proper development, and cooperation with external organizations becomes a popular approach for many enterprises to improve their knowledge storage and technology level, the background of which is called open innovative environment. The knowledge and technology development of Chinese enterprises in the open innovative environment is the research focus of this paper. This research is about the mechanisms and development of knowledge and technology of Chinese enterprises through cooperating with external organizations in the open innovative environment. System Dynamics, a method to provide model analysis and dynamic simulation of large and complex social problems, is applied to model this case and answer the following questions: -What factors can influence knowledge absorption and technological innovation in a Chinese enterprise? -What are the relationships among the key factors in the system? -How to explain the dynamic process of knowledge flow from external sources through organizational cooperation and technology changes in the inner organization? -What policy alternatives can be implemented to improve the system behaviour of the enterprise? And what are the consequences of the alternatives? The complex phenomenon is structured and explained and the above questions are answered by following the classic steps of System Dynamics modelling, i.e. conceptualization, formulation, verification and validation and system behaviour analysis. The conclusion is that, in the open innovative environment, the process of organizational cooperation and knowledge absorption indeed has a strong influence on the development of knowledge storage and technology innovation in a certain time period, through interacting of various factors and relationships. And the influence can be effectively measured and actively controlled. Then, several policy alternatives to improve the system behaviour are proposed as follows: -Alternative 1 of “Consideration of external cooperating organization” means in the beginning of the cooperation, investigation of the external partner from many aspects is necessary and important. -Alternative 2 of “Emphasis on self-development” means to improve the knowledge absorptive capacity of the enterprise in order to make knowledge absorption more feasible and effective, and to prepare the proper basis for internal technological innovation. -Alternative 3 of “Increase in market sensitivity” means the enterprise should speed up the process of market investigation, strategies planning, decision making and policy implementation, in order to be more flexible in market competition. Based on specific analysis and simulation results, there are both advantages and disadvantages in each of the alternatives. Alternative 1 is a necessity and can improve the knowledge storage in the enterprise to a high level in the long term, but an incorrect application of it has the risk of rushing into the “cooperation trap” that seems profitable in a short period while is actually not suitable or even harmful to the long-term development. Alternative 2 is the most sustainable policy and its effect can be obvious from at least five years on, while the price is that it requires high and continuous investment. The effect of Alternative 3 is obvious for both knowledge and technology of the enterprise, even in a short period of time; but the effort cost is also large, in human resource, financial input and policy design. Therefore, a kind of combination of the three policies is recommended based on the above idea. With proper and allowable budgets and conditions, an objective selection of external resources goes first, and then special efforts should be put into increasing market sensitivity and continuous and stable self-development, instead of sharp and intensive.